What is an executive in Australia? Roles, authority and the line with directors

If you run an Australian company, at some point the phrase "we're bringing on a CEO" or "our Chief Operating Officer handles that" will come up.

Executive is a business label, not a statutory term

The first thing to understand is that "executive" is not a defined legal term in the Corporations Act 2001 (Cth). You will not find a section of the Act that says what a Chief Executive Officer or Chief Financial Officer is. The Act does not regulate who can call themselves an executive, and no government register records executive appointments.

That sounds like a gap, but it is actually useful. It means a company is free to design its own leadership structure, with whatever titles and hierarchies suit its size and industry. A ten-person startup can have a founder who is called the Managing Director, while a 300-person business might layer in a Chief Operating Officer and a CFO. Both are valid because the Act leaves it to the company to decide.

Because the term is not defined, the practical meaning of "executive" in Australia is closer to a description of function: a senior leader who runs the business, implements strategy and manages teams, acting on authority delegated from the board. Exactly which of the company's leaders count as executives, and how much power each one holds, is a matter for the company's own governance documents rather than for statute.

The legal concept that actually matters: the officer

While "executive" is only a label, Australian company law has a nearby concept that does carry legal weight, and it is the one to understand. The Corporations Act 2001 (Cth) defines an officer in section 9AD. An officer of a company includes:

• a director or secretary of the company; or
• a person who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the company; or
• a person who has the capacity to affect significantly the company's financial standing.

This definition is broader than it looks. A senior executive who is not on the board, such as a CFO or a Chief Operating Officer, will usually still be an officer because they make decisions that affect a substantial part of the business, or because they can significantly affect the company's financial position. The law does not care what their business card says. It cares about the real decision-making power behind the role.

This matters because, under section 180, the core duties of care and diligence apply to "a director or other officer" of a corporation. A senior executive who is an officer therefore owes the company real legal duties, even though they were never formally appointed to the board. The label you put on the role does not decide who is protected and who is exposed; the substance of the authority does.

Where an executive gets the authority to act

An executive's power to bind the company does not come from their title. It comes from the board. In a registered company, the directors control and manage the business, subject to anything in the constitution. They can delegate parts of that authority, and that delegation is what turns a person into an executive in a functional sense.

The Corporations Act gives effect to this in section 126. It says a company's power to make, vary or discharge a contract, and to execute documents including deeds, may be exercised by an individual acting with the company's express or implied authority and on its behalf. So when a CEO signs a supplier agreement or a CFO approves a funding facility, they are not acting on their own power. They are exercising the company's power through authority the board has given them, either expressly in a resolution or delegation policy, or impliedly through the way the role has been held out.

This is why a vague delegation is dangerous. If the board never says in writing who can sign what and up to what dollar amount, an executive might assume authority they do not have, and a supplier, customer or bank might assume authority that was never given. The cleanest approach is to record the boundaries of each executive's authority in board minutes or a delegation of authority policy, with clear signing limits and an explanation of when board approval is needed before a deal can be committed.

Executive, director and officer: three different hats

People use these words interchangeably, but they describe different things that can overlap on the same person:

• Director: A person formally appointed or elected to the board. Directors owe the full set of statutory duties to the company and are registered with ASIC. A director's role is governance: setting direction, overseeing management and making the high-level decisions the law insists the board own.
• Officer: The legal category that captures anyone who makes decisions affecting the whole or a substantial part of the business. It includes all directors and secretaries, and also includes most senior executives who are not on the board.
• Executive: The working role that carries delegated authority to run day to day operations. An executive might or might not also be a director, and might or might not also be an officer. In practice, almost all executives who hold significant decision-making power will be officers, whether or not they sit on the board.

The Managing Director is the classic overlap. Section 201J of the Act lets the directors appoint one or more of themselves to the office of managing director. A managing director is simultaneously a director, an officer and an executive. They sit on the board and owe full director duties, and they run the business as the senior executive. A founder who is the sole director and calls themselves the CEO is in the same position: all three roles, one person.

The duties that attach to an executive

Because most executives are officers, they carry duties that go beyond their employment contract. Sections 180, 181, 182 and 183 of the Act impose the core obligations:

• to exercise care and diligence that a reasonable person in the role would exercise;
• to act in good faith in the best interests of the company and for a proper purpose;
• not to improperly use their position to gain an advantage or cause detriment to the company; and
• not to improperly use information obtained through the role.

These duties are owed to the company itself, and they apply regardless of what the executive's contract says. A contract cannot contract out of them. Breach can expose the executive to civil penalty proceedings brought by ASIC, compensation claims, and in serious cases even criminal consequences.

These obligations are largely the same whether the executive is formally a director or merely an officer who carries real decision-making power. That is the point many growing businesses miss. When they formalise a CFO role and hand that person the keys to the financials, they often do not realise they have also created a statutory officer with independent duties. The governance burden does not start at the board table.

A worked example: appointing a first CFO

Consider a mid-sized Australian company called Bluegum Bricks, with 40 employees and annual revenue of ten million dollars. The two founders are the sole directors. One is also the Managing Director and runs operations; the other focuses on sales.

Bluegum has decided it needs a Chief Financial Officer to take over budgeting, cash flow and reporting. The board appoints the CFO, but does nothing else. No board resolution, no delegation of authority, no contract with defined spending limits.

The CFO starts approving supplier payments and committing the company to a short-term financing facility. Because the CFO makes decisions that affect the whole of the company's financial standing, they are an officer under section 9AD of the Act. They owe care and diligence duties to Bluegum even though they never joined the board. When a bad financing decision causes a loss, ASIC could pursue them as an officer, not just as a poorly supervised employee.

If the founders had instead recorded the CFO's signing limits in a board minute, confirmed they were an officer, and put a proper executive contract in place, the position would be clearer for everyone. The role would still carry officer duties, because the substance of the power does not change, but the company would know exactly what the CFO could commit, and the CFO would understand the boundaries and the duties they now owe.

Common misconceptions about executives

A few misunderstandings come up again and again.

The first is that an executive is the same thing as a director, or that only directors owe statutory duties. As explained above, a senior executive who is not on the board is still very often an officer with real duties under the Act. The job title does not limit the legal exposure.

The second is that a title creates authority. Signing "CEO" under a contract does not bind the company if the board never delegated that authority. Authority flows from the board's express or implied delegation, not from the name on the office door. Conversely, an executive who signs outside their delegated limits may be personally exposed rather than merely acting for the company.

The third is that appointing an executive is purely an HR matter. It is partly that, but when the person is an officer, the appointment triggers governance obligations. If the executive is also appointed a director or secretary, the company must notify ASIC within 28 days under section 205B of the Act. Getting this wrong, or recording no delegation at all, creates gaps that surface only when a dispute or a regulator inquiry arrives.

How an Artificer Legal lawyer helps decide and document the structure

Because "executive" is undefined and every company's structure is different, the judgement calls are exactly where a lawyer earns their keep. A corporate lawyer at Artificer Legal can help you work out which of your senior leaders are actually officers and therefore owe statutory duties, and where the sensible dividing line sits between what the board keeps and what it delegates. That assessment is specific to your structure and cannot be answered by a template.

The lawyer then converts that into documents: a board resolution appointing the executive and recording the scope of their authority, a delegation of authority policy with signing limits, and a tailored executive contract that covers duties, remuneration, confidentiality, IP ownership, restraints, conflicts and termination. If the executive is also a director or secretary, they will handle the ASIC lodgement and any constitution updates. The value is not just the paperwork. It is knowing, before someone signs a binding deal or makes a costly decision, exactly who had the power to do it and what they owe the company.

The question to answer about your own leadership

Before you hand a title to your next senior hire, ask a specific question: does this person make decisions that affect the whole or a substantial part of the business, or can they significantly affect the company's financial standing? If the answer is yes, they are an officer under section 9AD of the Act, whether or not they ever join your board. That answer decides what duties they owe, what documents you need, and whether the board has actually delegated the authority they are expected to use. Most leadership problems in growing companies do not start with the wrong person in the role. They start with a role whose power was never clearly given, and duties that no one realised had attached.